Document Type

Conference Paper

Rights

This item is available under a Creative Commons License for non-commercial use only

Disciplines

Economics, Business and Management.

Publication Details

The International Conference on Global Trends in the Efficiency and Risk Management of Financial Services and the Financial Crisis, 2009.Hosted by Efficiency and Productivity Research Unit (EPRU). University of Leicester, UK.

Abstract

We consider operational risk and market integration in the banking system of the Central and East European Countries’ (CEECs). The analysis provides an interesting framework in relation to the effects of the global financial crisis in some European emerging banks. We implement an econometric model that takes into account the level of integration of these banks in relation to a number of most developed institutions, which are represented by the Dow Jones STOXX 600 index, with the objective of analyzing how this could be impacting the level of operational risk in the region. This paper provides new evidence that links market development and the level of risk associated with this region. In addition, we also look at entity size, and the importance of intangible assets, as these variables are considered of great relevance when analysing operating risk. Our results provide clear evidence of high levels of correlation in the region; however, no integration with the major indices was detected; this reflects the lack of development of the banking system in the CEECs. The results also show that entity size is the key factor having a directly impact in the level of Operational risk, since the other variables are found to be insignificant.

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